Exclusive-Glencore eyes Shell Singapore assets as CNOOC pulls out, sources say

FILE PHOTO: Vessels pass the Shell oil refinery on Pulau Bukom in the waters off the southern coast of Singapore February 26, 2016. REUTERS/Edgar Su/File Photo

By Chen Aizhu, Trixie Yap and Yantoultra Ngui

SINGAPORE – Swiss miner and commodities trader Glencore is looking at buying Shell’s oil refinery and petrochemical units in Singapore as the oil major seeks a buyer for the sites after earlier suitors dropped out, several industry and trading sources said.

Glencore is working jointly with Indonesia’s PT Chandra Asri Petrochemical to evaluate the assets, two of the sources said.

The assets include a refinery capable of processing 237,000 barrels per day (bpd) of oil and a 1-million-metric-ton-per-year ethylene plant located on Bukom island, just south of Singapore, as well as a plant that produces mono-ethylene glycol on Jurong island in the Southeast Asian city-state’s west.

Buying the Bukom and Jurong assets would give Glencore a physical foothold for its trading in Asia’s main oil hub. However, the ageing site has struggled to make money on its products, particularly for petrochemicals, and faces competition from newer refineries in China and elsewhere.

Shell, which announced a strategic review of the assets last June, declined to comment.

Glencore said it does not comment “on market rumour or speculation,” while Chandra Asri did not respond to a request for comment.

Investment bank Morgan Stanley is working with Glencore on a potential deal, according to two sources familiar with the matter. The bank declined to comment.

Reuters reported in December that Shell shortlisted at least four companies including state-run China National Offshore Oil Corp (CNOOC), top global energy trader Vitol and private Chinese chemicals firms Eversun Holdings and Befar Group to submit formal bids by the end of February.

However, CNOOC and Befar have opted out, several sources with knowledge of the situation said.

CNOOC, Befar and Eversun didn’t respond to requests for comment. Vitol declined to comment.

Glencore has shown interest in the assets since early in the process, according to six sources, including trading executives close to the firm. Glencore’s only refining asset is a 100,000 bpd facility in Cape Town that is South Africa’s third-largest refinery. It also owns a lubricants plant in Durban.

AGEING ASSETS

High operating costs at the Shell facility as well as the spectre of a carbon tax the city-state is set to implement were deterrents to would-be buyers, sources have said.

Shell’s Bukom plant was Singapore’s first refinery when it opened in 1961 and it was once the company’s biggest refining-petrochemical complex globally.

CNOOC, which has a long-time partnership with Shell in China, halted its potential bid for the assets around late December, stopping short of hiring financial advisors after discussions with several global investment banks, according to two people with knowledge of the matter.

CNOOC, which has the smallest refining portfolio among China’s three oil majors, has no experience acquiring downstream assets outside of China.

Goldman Sachs, which is managing the sale process for Shell, declined to comment.

The size of any potential bids could not be determined.

(Reporting by Chen Aizhu, Trixie Yap, Yantoultra Ugui and Florence Tan; Additional reporting by Julia Payne in London, Gayatri Suroyo in Jakarta and Kane Wu in Hong Kong; Editing by Tony Munroe and Christian Schmollinger)